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HomeMy WebLinkAbout09-14-16 Work Session EUGENE CITY COUNCIL AGENDA September 14, 2016 12:00p.m.CITYCOUNCILWORKSESSION HarrisHall 125East8Avenue th Eugene,Oregon97401 MeetingofSeptember14,2016; HerHonorMayorKittyPiercyPresiding Councilors 12:00p.m.CITYCOUNCILWORKSESSION HarrisHall,125East8Avenue th 12:00p.m.A.WORKSESSION AnnualReportsfromCivilianReviewBoard andPolice!´£¨³®±Ȍ²Office 12:45p.m.*B.WORKSESSION UseofMarijuanaTaxFundsandRetailCannabisRegulations Adjourn. *timeapproximate J:\\CMO\\2016 Council Agendas\\M160914\\A160914S.doc ¶¶¶ȁ¤´¦¤­¤®±ȁ¦®µȁ J:\\CMO\\2016 Council Agendas\\M160914\\A160914S.doc ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY www.eugeneor.gov ISSUESTATEMENT BACKGROUND RELATEDCITYPOLICIES COUNCILOPTIONS CITY-!.!'%2Ȍ3RECOMMENDATIONANDSUGGESTEDMOTION ATTACHMENTS FORMOREINFORMATION J:\\CMO\\2016 Council Agendas\\M160914\\S1609 14A.docx !³³ ¢§¬¤­³ ! Њ Section Page Ћ Ќ Ѝ Ў Џ А Б В ЊЉ ЊЊ ЊЋ o o ЊЌ o o o o o o o o ЊЍ ЊЎ ЊЏ ЊА ź źź źźź źǝ Office of the Police Auditor 2015 Annual Report | 1 Office of the Police Auditor 2015 Annual Report | 2 Office of the Police Auditor 2015 Annual Report | 3 Office of the Police Auditor 2015 Annual Report | 4 Brady Office of the Police Auditor 2015 Annual Report | 5 Office of the Police Auditor 2015 Annual Report | 6 Office of the Police Auditor 2015 Annual Report | 7 Office of the Police Auditor 2015 Annual Report | 8 Office of the Police Auditor 2015 Annual Report | 9 Office of the Police Auditor 2015 Annual Report | 10 Office of the Police Auditor 2015 Annual Report | 11 Office of the Police Auditor 2015 Annual Report | 12 Office of the Police Auditor 2015 Annual Report | 13 Office of the Police Auditor 2015 Annual Report | 14 Office of the Police Auditor 2015 Annual Report | 15 Office of the Police Auditor 2015 Annual Report | 16 Office of the Police Auditor 2015 Annual Report | 17 Office of the Police Auditor 2015 Annual Report | 18 5815123274213 Office of the Police Auditor 2015 Annual Report | 19 Office of the Police Auditor 2015 Annual Report | 21 Office of the Police Auditor 2015 Annual Report | 22 Office of the Police Auditor 2015 Annual Report | 23 Office of the Police Auditor 2015 Annual Report | 24 Office of the Police Auditor 2015 Annual Report | 25 Office of the Police Auditor 2015 Annual Report | 26 Office of the Police Auditor 2015 Annual Report | 27 Office of the Police Auditor 2015 Annual Report | 28 Office of the Police Auditor 2015 Annual Report | 29 Office of the Police Auditor 2015 Annual Report | 30 Office of the Police Auditor 2015 Annual Report | 31 Office of the Police Auditor 2015 Annual Report | 32 ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY www.eugeneor.gov ISSUESTATEMENT BACKGROUND RELATEDCITYPOLICIES COUNCILOPTIONS CITY-!.!'%2Ȍ3RECOMMENDATION ATTACHMENTS J:\\CMO\\2016 Council Agendas\\M160914\\S160914B.docx FORMOREINFORMATION ATTACHMENTA LEAGUE OF OREGON CITIES LOCAL GOVERNMENT REGULATION OF MARIJUANA IN OREGON Published by the League of Oregon Cities Table of Contents Introduction and a Word of Caution ..................................................................................................... 1 Home Rule in Oregon .............................................................................................................................. 3 Federal Law .............................................................................................................................................. 5 An Overview of Oregon’s Marijuana Laws ........................................................................................... 6 Oregon Medical Marijuana Act ............................................................................................................ 6 Recreational Marijuana ......................................................................................................................... 7 StateTaxation of Recreational Marijuana ............................................................................................. 7 Registration and License Types ............................................................................................................ 8 Early Sales of Recreational Marijuana ................................................................................................ 10 Is a Consolidated System on the Horizon? ......................................................................................... 10 Local Government Options for Regulation of Marijuana .................................................................. 12 State Restrictions on the Location of Medical and Recreational Marijuana Activities ....................... 12 Medical Grow Sites and Recreational Producers ........................................................................ 12 Medical Processing Sites and Recreational Processors .............................................................. 13 Medical Marijuana Dispensaries ................................................................................................. 13 Wholesalers and Recreational Retailers ...................................................................................... 14 Compatibility with Local Requirements - Land Use Compatibility Statement (LUCS) ............ 14 Local Government Means of Regulation ............................................................................................. 15 Tax .............................................................................................................................................. 15 Ban on Early Sales ...................................................................................................................... 16 Ban on State-Registered and Licensed Activities ....................................................................... 16 Business License Ordinance ....................................................................................................... 18 Development Code...................................................................................................................... 18 Land Use Code ............................................................................................................................ 18 Time, Place and Manner Regulations ......................................................................................... 19 Appendix A: Early Sales Opt Out ........................................................................................................ 21 Appendix B: Opt Out by Voter Referral ............................................................................................. 24 Appendix C: Opt In by Voter Referral ................................................................................................ 31 Appendix D:Local Tax by Voter Referral .......................................................................................... 38 Appendix E:Sample Time, Place and Manner Restrictions on Marijuana Businesses .................. 45 Introduction and A Word of Caution Introduction and a Word of Caution The League of Oregon Cities (League) has prepared this guide to assist cities in evaluating local needs and concerns regarding medical and recreational marijuana, so that city councils can find solutions that are in the best interests of their community. The League does not take a position on which choices a city council should make. The League’s mission is to protect the home rule authority of cities to make local decisions, and to assist city councils in implementing the decisions they make, whatever those decisions might be. The League published the first edition of this guide in the spring of 2015. Its original focus was regulation of medical marijuana under The law with regard to local the Oregon Medical Marijuana Act (OMMA). In November 2014, government regulation of Oregon voters adopted Measure 91, legalizing the growing, marijuana is complex because it distribution, possession and use of marijuana in certain amounts for involves the interplay of state and recreational (i.e. non-medical) personal use. In 2015, the state federal law, and the law continues Legislature passed four bills—HB 3400, HB 2041, SB 460 and SB to evolve. At press time, there 844—which made comprehensive reforms to Measure 91 and the were several court cases pending OMMA and addressed issues of local control, taxation, and early regarding the legal authority of sales, among other things. All of those changes are now codified in local governments to regulate, up ORS 475B. to and including prohibiting, the operation of medical marijuana Since that time, the Oregon Liquor Control Commission (OLCC), facilities. The League will the agency charged with implementing the recreational marijuana continue to update its members licensing process, and the Oregon Health Authority (OHA), the as the law in this area changes. agency charged with implementing the OMMA, have engaged in rulemaking. In addition, in 2016, the Legislature once again amended Oregon’s marijuana laws with the adoption of three additional pieces of legislation— HB 4014 (Or Laws 2016, ch 24), SB 1511 (Or Laws 2016, ch 83), and SB 1598 (Or Laws 2016, ch 23). Some of the changes made by those bills are discussed in more detail below. All of those changes havemade it difficult for local government officials to stay on top of this ever evolving regulatory landscape. Consequently, The sample ordinance the League has prepared this third edition of the guide, revising its provisions included in this regulatory guidance to reflect the latest statutory and administrative rule guide are intended to be a changes, as well as providing sample ordinance wording for both starting point, not an ending medical and recreational marijuanafacilitiesthat is consistent with those point, for any jurisdiction considering taxing, changes.Because most experts believe that the medical marijuana and regulating or prohibiting recreational marijuana systems will eventually merge, the sample marijuana businesses. ordinance provisions in this edition do not differentiate between medical marijuana or recreational marijuana businesses and treats both the same for purposes of regulating the time place and manner of those activities. Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 1 May 2016 (Third Edition) Introduction and A Word of Caution This guide begins by providing an overview of the source of local government authority— Oregon’s constitutional home rule provisions. The guide then provides a brief explanation of the status of marijuana under federal law, as well as a summary of Oregon’s marijuana laws, before turning to a discussion of local control and options available for local governments. The guide concludes with sample ordinances to use as a starting point if a city decides it wants to tax, regulate or prohibit marijuana facilities. It is important to note that this guide, although lengthy, is not intended to give exhaustive treatment of every issuethat a city might face with respect to marijuana regulation. The regulation of marijuana is becoming increasingly complex as the industry grows and evolves and as the Legislature and state agencies adopt new laws and administrative rules. As such, this guide and the sample wording that is attached serves as a starting point (not and ending point) for local government officials to understand this topic so that eventuallythey can spot issues and further analyze and develop local solutions. This guide is not a substitute for legal advice City councils considering taxing, regulating or prohibiting marijuana businesses should not rely solely on this guide or the resources contained within it. Any city council considering any form of regulation of marijuana should consult with its city attorney regarding the advantages, disadvantages, risks and limitations of any given approach. Legal counsel can also assist a city in preparing an ordinance that is consistent with existing ordinances and with a city’s charter, and advise on what process is needed to adopt the ordinance. Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 2 May 2016 (Third Edition) Home Rule Home Rule in Oregon Any discussion of a city’s options for regulating anything that is also regulated by state law must begin with a discussion of the home rule provisions of the Oregon Constitution, from which cities derive their legal authority. Home rule is the power of a local government to set up its own system of governance and gives that local government the authority to adopt local ordinances without having to obtain permission from the state. The concept of home rule stands in contrast to a corollary principle known as Dillon’s Rule, which holds that municipal governments may engage only in activities expressly allowed by the 1 state because municipal governments derive their authority and existence from the state. Under Dillon’s Rule, if there is a reasonable doubt about whether a power has been conferred to a local government, then the power has not been conferred. Although many states follow Dillon’s Rule, Oregon does not. Instead, a city government in Oregon derives its home rule authority through the adoption of a home rule charter by the voters of that community pursuant to Article XI, section 2, of the Oregon Constitution, which was added in 1906 by the people’s initiative. Article XI, section 2, provides, in part, that: “The Legislative Assembly shall not enact, amend or repeal any charter or act of incorporation of any municipality, city or town. The legal voters of every city and town are hereby granted power to enact and amend their municipal charter, subject to the Constitution and criminal laws of the State of Oregon.” A home rule charter operates like a state constitution in that it vests all government power in the governing body of a municipality, except as expressly stated in that charter, or preempted by state or federal law. According to the League’s records, all of Oregon’s 242 incorporated cities have adopted home rule charters. The leading court case interpreting Oregon’s home rule amendment is La Grande/Astoria v. PERB, 281 Or 137, 576 P2d 1204, aff’d on reh’g, 284 Or 173, 586 P2d 765 (1978). In that case, the Oregon Supreme Court said that home rule municipalities have authority to enact substantive policies, even on a topic also regulated by state statute, as long as the local enactment is not “incompatible” with state law, “either because both cannot operate concurrently or because the Legislature meant its law to be exclusive.” In addition, the court said that where there is a local enactment and state enactment on the same subject, the courts should attempt to harmonize state 2 statutes and local regulations whenever possible. 1 SeeJohn F. Dillon, 1 The Law of Municipal Corporations § 9b, 93 (2d ed 1873). 2 Criminal enactments are treated differently. Local criminal ordinances are presumed invalid, and that presumption cannot be overcome if the local enactment prohibits what state criminal law allows or allows what state criminal law prohibits. See City of Portland v. Dollarhide, 300 Or 490, 501, 714 P2d 220 (1986). Consequently, theOregon Supreme Court’s case law is clear that a local government may not recriminalize conduct for which state law provides criminal immunity. See City of Portland v. Jackson, 316 Or 143, 147-48, 850 P2d 1093 (1993) (explaining how to determine whether a state law permits what an ordinance prohibits, including where the Legislature expressly permits specified conduct). Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 3 May 2016 (Third Edition) Home Rule In subsequent cases, the Oregon Supreme Court directed courts to presume that the state did not intend to displace a local ordinance in the absence of an apparent and unambiguous intent to do 3 so.Along the same lines, a local ordinance can operate concurrently with state law even if the 4 local ordinance imposes greater or different requirements than the state law. Where the Legislature’s intent to preempt local governments is not express, and where the local and state law can operate concurrently, there is no preemption and local governments retain their authority to regulate. As such, the Oregon Supreme Court has concluded that a negative inference that can be drawn from a statute is insufficient to preempt a local government’s home 5 rule authority.For example, where legislation “authorizes” a local government to regulate in a particular manner, a court will not read into that legislation that the specific action authorized is to the exclusion of other regulatory alternatives, unless the Legislature makes it clear that the authorized regulatory form is to be the exclusive means of regulating. 3 See, e.g., State ex rel Haley v. City of Troutdale, 281 Or 203, 210-11, 576 P2d 1238 (1978) (finding no manifest legislative intent to preempt local provisions that supplemented the state building code with more stringent restrictions). 4 See Rogue Valley Sewer Services v. City of Phoenix, 357 Or 437, 454-55, 353 P3d 581 (2015); see also Thunderbird Mobile Club v. City of Wilsonville, 234 Or App 457, 474, 228 P3d 650, rev den, 348 Or 524 (2010) (“A local ordinance is not incompatible with state law simply because it imposes greater requirements than does the state, nor because the ordinance and state law deal with different aspects of the same subject.”(internal quotations omitted)). 5 Rogue Valley Sewer Services, 357 Or at 453-55 (concluding that explicit authorization for cities to regulate certain utilities did not, by negative implication, create a broad preemption of the field of utility regulation); Gunderson, LLC v. City of Portland, 352 Or 648, 662, 290 P3d 803 (2012) (explaining that even if a preemption based on a negative inference is plausible, if it is not the only inference that is plausible, it is “insufficient to constitute the unambiguous expression of preemptive intention”required under home rule cases). Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 4 May 2016 (Third Edition) Federal Law Federal Law Marijuana remains a Schedule I controlled substance under the federal Controlled Substances Act (CSA). Schedule I substances are those for which the federal government has made the following findings: The drug or other substance has a high potential for abuse; The drug or other substance has no currently accepted medical use in treatment in the United States; and There is a lack of accepted safety for use of the drug or other substance under medical supervision. Recently, the federal government has started reexamining the status of marijuana. In December 2014, Congress directed the Department of Justice not to use any of its funding to prevent states like Oregon from implementing their medical marijuana laws. The effect of that appropriations bill is currently beinglitigated in federal court. In addition, under the federal CSA, the attorney general may, by rule, transfer a drug between schedules or remove a drug from the schedules if certain requirements are met. The United States Drug Enforcement Agency (DEA) has indicated that it currently is reviewing marijuana’s status as a Schedule I controlled substance and expects to release a final determination in the first half of 2016. The DEA has not, however, given any indication of whether it will reclassify or remove marijuana from the schedules. Should the DEA reclassify or remove marijuana from Schedule I, the League will update its members to address the implications of any reclassification. Oregon’s laws on medical and recreational marijuana do not, and cannot, provide immunity from federal prosecution. Consequently, state law does not protect marijuana plants from being seized or people from being prosecuted if the federal government chooses to take action under the CSA against those using marijuana in compliance with state law. Similarly, cities cannot provide immunity from federal prosecution. Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 5 May 2016 (Third Edition) Oregon’s Marijuana Laws An Overview of Oregon’s Marijuana Laws There are two separate laws and regulatory structures governing marijuana at the state level: the Oregon Medical Marijuana Act, which regulates medical marijuana, and the Control and Regulation of Marijuana Act, which regulates recreational marijuana. Since their adoption by the voters, the Legislature has made substantial changes to both acts. Oregon Medical Marijuana Act Oregon has had a medical marijuana program since 1998, when voters approved Ballot Measure 67, the Oregon Medical Marijuana Act (OMMA) (codified at ORS 475B.400 – ORS 475B.525). Since that time, the Legislature has amended the OMMA on a number of occasions. Generally, under the OMMA, a person suffering from a qualifying debilitating health condition must get a written statement from a physician that the medical use of marijuana may mitigate the symptoms or effects of that condition. The person may then obtain a medical marijuana card from the Oregon Health Authority, which is the agency charged with regulating medical marijuana. The patient may designate a caregiver and a grower if the patient decides not to grow his or her own marijuana, each of whom also get a medical marijuana card. Patients, caregivers and growers with medical marijuana cards, who act in compliance with the OMMA, are immune from state criminal prosecution for any criminal offense in which possession, delivery or manufacture of marijuana is an element. Those without medical marijuana cards may also claim immunity from state criminal prosecution if they are in compliance with the OMMA and, within 12 months prior to the arrest at issue, had received a diagnosis of a debilitating medical condition for which a physician had advised medical marijuana could mitigate the symptoms or effects. The OMMA also provides protection from state criminal prosecution for medical marijuana processors and medical marijuana dispensaries acting in compliance with the law. The OMMA originally was envisioned as a system in which patients would grow for themselves the marijuana that they needed, or designate a small scale grower, and, as a result, the regulation was relatively minimal. The OMMA did not originally envision large-scale growsites, processing sites, or dispensaries. However, as time went on, the Legislature saw a need to impose more restrictions on medical marijuana grows, create a system for registering processors, and create a system for state-registered facilities to lawfully transfermedicalmarijuana between growers and patients or caregivers. Legislation in 2015 and 2016 addressed some of the local government concerns about the lack of regulation that had not been addressed in the original legislation. For example, a medical marijuana grow site now can have only a limited number of mature marijuana plants and a limited amount of usable marijuana harvested from those plants. In addition, medical marijuana is now classified as a farm crop, but the Legislature was careful to carve out local regulatory authority not available for other farm crops. The Legislaturealsoadded a new registration category for medical marijuana processors, and imposed greater restrictions on those facilities. Along similar lines, the Legislaturealsoadded further restrictions on where certain medical Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 6 May 2016 (Third Edition) Oregon’s Marijuana Laws marijuana facilities can locate, and imposed new testing, labeling, inspection and reporting requirements. With the Legislature’s more robust statutory scheme came more extensive administrative rules from the OHA. Those rules, found primarily in Oregon Administrative Rule 333-008, cover many of the gaps left by the Legislature,including setting out a detailed registration system and requirements for testing, reporting, background checks, security, and advertising, among other things. Recreational Marijuana In November 2014, Oregon voters approved Ballot Measure 91, which decriminalized the personal growing and use of certain amounts of recreational marijuana by persons 21 years of age or older. The OLCC is the agency charged with licensing and regulating the growing, processing,and sale of recreational marijuana. In particular, the OLCC has been tasked with administering a license program for producers, processors, wholesalers and retailers, and under that program, a person may hold more than one type of license. Since the voters approved Measure 91, the Legislature has made notable changes to its structure, primarily increasing accountability and safety requirements. For example, the Legislatureadded testing, labeling, inspection and reporting requirements for licensees, required handlers permits for those working with marijuana, and charged the OLCC with licensing OHA-accredited laboratories to conduct the required testing. The Legislature also expanded the OLCC’s rulemaking authority, tasking the agency with, among other things, developing and maintaininga seed-to-sale tracking system and adopting restrictions on the size of recreational marijuana grows. The Legislature also tasked the OLCC with certifying public and private marijuana researchers.As noted above, the Legislature has also tasked the OLCC with creating a system for transitioning medical marijuana registrants to OLCC recreational licensing, with the possibility for recreational licensees toregister with the OLCC to engage in activities related to medical marijuana. The OLCC has adopted temporary rulesthat begin to implement those legislative changes and to fill some of the gaps left by the Legislature. For example, the OLCC has imposed extensive security requirements for alarm systems, video surveillance, and a restriction on public access to certain facilities or areas within facilities. The OLCC has also imposed health and safety requirements, including sanitary requirements and restrictions on how marijuana is processed. In addition, the OLCC has addressed a number of other issues including testing, packaging, labeling, advertising, waste, and implementing a seed to sale tracking system. At the time this guide was published, the OLCC was in the process of adopting permanent rules. State Taxation of Recreational Marijuana Early sales of recreational marijuana from medical marijuana dispensaries aretaxed at a rate of 25 percent. When sales from OLCC-licensed retailersbegin later in 2016, the sale of marijuana items will be subject to a 17 percent state tax, to be collected by those retailers. However, in Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 7 May 2016 (Third Edition) Oregon’s Marijuana Laws 2016, the Legislature clarified that medical marijuana cardholders and caregivers will not have to pay the state tax on the retail sale of marijuana items. (SB 1511, § 17) Of that state tax revenue, 10 percent will be transferred to cities to “assist local law enforcement in performing its duties” under the Control and Regulation of Marijuana Act, i.e. the law 6 regulating recreational marijuana.That 10 percent will be distributed using different metrics before and after July 1, 2017. Before that date, tax revenues will be distributed proportionately to all Oregon cities based on their population. After July 1, 2017, those revenues will be distributed proportionately based on the number of licenses issued for premises located in each city. Fifty percent of revenues will be distributed based on the number of production, processor and wholesale licenses issued in the city, and the other 50 percent will be distributed based on the number of retail licenses issued in the city. However, if a city adopts an ordinance prohibiting the establishment of any registered or licensed marijuana activities, the city will not be eligible to receive state marijuana tax revenues. Registration and License Types Taking into consideration both the medical system and the retail system, there are 10marijuana 7 activities that require registration or a license from the state.The table on the next page provides a summary of each type of activity and its registration/licensing requirements along with a citation to the laws that governs those activities. 6 The remaining tax revenues will be distributed as follows: 40 percent to the Common School Fund;20 percent to the Mental Health Alcoholism and Drug Services Account; 15 percent to the State Police Account; and 10 percent to counties. 7 This guide focuses on regulation of those activities. In 2016, the Legislature preempted cities from prohibiting or otherwise limiting homegrown marijuana production, processing, and storage as described in ORS 475B.245 and a medical marijuana patient and caregiver’s possession of seeds, plants, and usable marijuana as allowed under state law. (HB 4014, § 33). Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 8 May 2016 (Third Edition) Oregon’s Marijuana Laws Oregon’s Ten Regulated Marijuana Activities Research & Grow Make Products Wholesale Transfer to User Testing* :**: : Marijuana Grow Marijuana WholesalerDispensaryLaboratories : : SiteProcessing Site Conducts testing Purchase Transfer usable of recreational Location for Location for marijuana items marijuana, and medical planting, compounding or Regulated Activities for resale to a immature marijuana items. cultivating, converting person other than marijuana plants, growing, marijuana into a consumer. seed, and medical Obtain license trimming, or medical products, products, under ORS harvesting concentrates or concentrates and 475B.560 and OAR marijuana or extracts extracts to 845-025-5000 to drying marijuana patients and leaves or flowers 845-025-5075. Medical caregivers.*** Obtain accreditation from License with OLCC Register with OHA OHA Register with OHA Register with OHA SB 1511, §4 (2016) ORS 475B.450; OAR 333-ORS 475B.565 ORS 475B.420; OAR 333-ORS 475B.435; 008-1000 to OAR 333- 008-010 to 333-008-OAR 333-008-1600 to 008-1248 0750333-oo8-2200 : : : : ProducersProcessorsWholesalersRetailers Researchers: Manufacture, Process, Purchase Sell marijuana Activities**** Public or private plant, cultivate, compound or marijuana items items to a research of grow, harvest convert marijuana for resale to a consumer medical and into products, person other than recreational concentrates or a consumer marijuana, Regulated extracts, but does including medical not include and agricultural packaging or research labeling Recreational Obtain license Obtain license Obtain license Obtain license Certification from from OLCC from OLCC from OLCCfrom OLCC OLCC ORS 475B.090; OAR 845-ORS 475B.100; OAR 845-ORS 475B.110; OAR 845- ORS 475B.070; OAR 845- ORS 475B.235 and OAR 025-3200 to OAR 845-025-3500025-2800 to OAR 845- 025-2000 to OAR 845- 845-025-5300 to 845- 025-3290 025-2890 025-2080 025-5350 *These activities support both the recreational and medical marijuana systems. **There is no means for obtaining a medical wholesale license from OHA. Legislation in 2016 allows an OLCC licensed recreational wholesaler to obtain authority from OLCC to also wholesale medical marijuana. ***Medical Marijuana Dispensaries can do limited retail sales until December 2016. OAR 333-008-1500 ****In addition to the ten types of regulated activities, certain employees must also obtain an OLCC handlers permit. ORS 475B.215; OAR 845-025-5500 to OAR 845-025-5590. Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 9 May 2016 (Third Edition) Oregon’s Marijuana Laws Early Sales of Recreational Marijuana Since July 1, 2015, people 21 years of age and older have been able topossess limited amounts of recreational marijuana under state law. Becausethe OLCC was not preparedto issue licenses for the retail sale of recreational marijuana at that same time, the Legislature authorized medical marijuana dispensaries to sell limited quantities of recreational marijuana between October 1, 2015 and December 31, 2016. By the time early sales end, recreational retailers are expected to be operating. Under current law, medical marijuana dispensaries may sell the following to a person who is 21 or older and presents proof of age: One quarter of one ounce of dried marijuana leaves and flowers per person per day; Four marijuana plants that are not flowering;and Marijuana seeds. Starting June 2, 2016, medical marijuana dispensaries also may sell the following to a person who is 21 or older and presents proof of age: Non-psychoactive medical cannabinoid products intended to be applied to the skin or hair; One single-serving, low-dose unit of cannabinoid edible per person per day; and One prefilled receptacle of cannabinoid extract per person per day. Is a Consolidated System on the Horizon? During the 2016 legislative session, the Legislature amended the recreational marijuana laws to begin shifting towards a consolidated system. In particular, the Legislature imposed a requirement on the OLCC to adopt rules governing the process of transitioning from medical registration with OHA to medical/recreational licensing with the OLCC. Specifically, one bill provides that the OLCC is to establish a program that allowsmedical registrants to convert to a retail license. HB 4014 §§ 24 and 25 (2016). In addition, another bill created new provisions allowing recreational licensees to register with the OLCC to engage in the same retail license activity for medical marijuana purposes, essentiallyallowing one licensee to engage in retail and as medical marijuana activities under the regulatory control of the OLCC. (SB 1511, §§ 1-6) At the time this guide was published,the OLCC has yet to issue rules as set out in that legislation. However, the upshot of those changes is that subject to the rules OLCC adopts, that legislation will enable co-location of both medical and recreational marijuana activities under the oversight of one agency. Although oversight of marijuana activities may be consolidating into the OLCC, it’s important to note that for now the recreational and medical programs continue to retain separate’ characteristics and businesses operating within them will be subject to different rules. For example, in 2016 the Legislature added a separate description of what constitutes medical Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 10 May 2016 (Third Edition) Oregon’s Marijuana Laws marijuana, with a definition that suggests that medical products may carry a different potency than recreational marijuana. (SB 1511, § 11). Additionally, as discussed below, the spacing requirements remain different (for recreational retailers local governments can’t require more than a 1,000 feet buffer, but medical marijuana under state law must be at least 1,000 feet from each other.) Thus a person licensed to conduct both retail and medical marijuana activities will still be operating under different sets of rule for each activity. Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 11 May 2016 (Third Edition) Oregon’s Marijuana Laws Local Government Options for Regulation of Marijuana As set out in ORS 475B.340, ORS 475B.500, and under their home rule authority, cities have a number of options Any city wanting to regulate or for regulating marijuana activities. Whether to regulate is a prohibit marijuana activities local choice. What follows is an overview of the options should work closely with its legal available to cities. However, before embarking on any form counsel to survey existing state of regulation, cities should begin by examining the 10 types law, administrative rules, and of marijuana activities authorized by state statute and the local code; develop a means to restrictions state law (including administrative regulations implement and enforce any new adopted by the OLCC \[found in OAR chapter 845, division ordinances; and then craft the 25\] and the OHA \[found in OAR chapter 333, division 8\]) necessary amendments to the places on each type of activity to determine whether a gap city’s code to accomplish the exists between what state law allows and what the council’s intent. community desires to further restrict. State Restrictions on the Location of Medical and Recreational Marijuana Activities Before regulating or prohibiting state-registered or licensed marijuana activities, cities should examine the restrictions in state law. It is important to know about any state restrictions that create a regulatory “floor.” In other words, although the courts generally have upheld a city’s authority to impose more stringent restrictions than those described in state law, a city likely cannot impose restrictions that are more lenient than those described in state law. So for example, whenstate law requires a 1,000-foot buffer between medical marijuana dispensaries, a city could not allow dispensaries to locate within 500 feet of each other. Moreover, some cities may determine that state regulation of marijuana activities is sufficient and that local regulation is therefore unnecessary. For those cities interested in prohibiting any of the marijuana activities listed above,it is important toexamine the state restrictions, particularly in smaller communities. Those restrictions effectively may preclude a person from becoming registered with or licensed by the state to engage in marijuana activities. Medical Grow Sites and Recreational Producers ORS 475B does not restrict where medical marijuana grow sites or recreational marijuana producers can locate. In fact, in 2016, the Legislature clarified that both medical and recreational marijuana are farm crops, allowing marijuana to be grown on land zoned for exclusive farm use. Nonetheless, such grows are still subject to local time place and manner restrictions. However, the OLCC has adopted some restrictions on where recreational marijuana facilities generally can locate,andwhere recreational marijuana producers in particular can locate. (OAR Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 12 May 2016 (Third Edition) Oregon’s Marijuana Laws 845-025-1115). All recreational marijuana facilities (including grows) are prohibited from locating: On federal property; At the same physical location or address as a medical marijuana facility that has maintained its medical registration with the OHA; or At the same physical location or address as a liquor licensee. (OAR 845-025-1230) Recreational marijuana growers are additionally prohibited from locating on public land or on the same tax lot or parcel as another licensed grower under common ownership. (OAR 845-025-1115) In addition to location restrictions, state law and rule places limitations on the number of plants that a medical marijuana grower can grow in residential zones on the size of recreational marijuana grow canopies. Generally, a medical marijuana grow site may have up to 12 mature plants if it is located in a residential zone, and up to 48 mature plants if it is located in any other zone. However, there are exceptions for certain grow sitesthat were in existence and had registered with the state by January 1, 2015. For those grow sites, the number of plants is limited to the number of plants that were at the grow site as of December 31, 2015, aslong as that number does not exceed 24 mature plants per grow site in a residential zone and 96 mature plants per grow site in all other zones. A grower loses the right to claim those exceptions, however, if the grower’s registration is currently suspended or revoked. Those medical limits, however do not apply to grow sites that are converting to recreational grows under the provisions of SB 4014 and are reapplying through the OLCC to become a recreational and medical grow site. Medical Processing Sites and Recreational Processors Processors that produce medical marijuanaextracts may not be located in an area zoned for residential use. The OHA has defined “zoned for residential use” to mean “the only primary use allowed outright in the designated zone is residential.” (OAR 333-008-0010(64)). Processors that make recreational marijuana extracts may not be located in an area zoned exclusively for residential use, and they are also subject to the general location restrictions in the OLCC rules outlined above. Medical Marijuana Dispensaries Under state law, medical marijuana dispensaries may not locate in residential zones, may not be located at the same address as a grow site, and may not be located within 1,000 feet of another dispensary. In addition, dispensaries may not locate within 1,000 feet of a public elementary or secondary school for which attendance is compulsory under ORS 339.020, or a private or parochial Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 13 May 2016 (Third Edition) Oregon’s Marijuana Laws 8 elementary or secondary school, teaching children as described in ORS 339.030(1)(a).As a practical matter, that means that dispensaries cannot locate within 1,000 feet of most public and private elementary, middle and high schools. However, if a school is established within 1,000 feet of an existing dispensary, the dispensary may remain where it is unless the OHA revokes its registration. In addition, under the 2016 legislation, a city can allow a dispensary within 500 feet of a school under limited circumstances. (SB 1511, § 29). Wholesalers and Recreational Retailers Wholesale and retail licensees may not locate in an area that is zoned exclusively for residential use and are subject to the same general OLCC restrictions on location noted above. The same requirements that apply to medical marijuana dispensaries regarding their proximity to schools apply to retail licensees. As a practical matter, a retail licensee may not locate within 1,000 feet of most public and private elementary, middle and high schools. However, if a school is established within 1,000 feet of an existing retail licensee, the licensee may remain where it is unless the OLCC revokes its license. In addition, under the 2016 legislation, a city can allow a dispensary within 500 feet of a school under limited circumstances. (SB 1511). State law does not impose a 1,000-foot buffer between retailers as it does for medical marijuana dispensaries. In fact, as discussed further under local government options, under state law, a city cannot prohibit a retailer from being located within a distance greater than 1,000 feet from another retailer. In other words, the maximum buffer that a city can impose between retailers is 1,000 feet. Compatibility with Local Requirements - Land Use Compatibility Statement (LUCS) In addition to express restrictions on the location of certain marijuana facilities, state law also requires certain marijuana facilities to obtain a land use compatibility statement (LUCS) from the local government before the state will issue a license. In particular, recreational producers, processors, wholesalers, and retailers must request a land use compatibility statement from a local government before the OLCC issues a license. A LUCS describes whether the proposed use is allowable in the zone requested, and must be issued within 21 days of: 8 ORS 339.020 provides, “Except as provided in ORS 339.030: (1) Every person having control of a child between the ages of 7 and 18 years who has not completed the 12th grade is required to send the child to, and maintain the child in, regular attendance at a public full- time school during the entire school term. (2) If a person has control of a child five or six years of age and has enrolled the child in a public school, the person is required to send the child to, and maintain the child in, regular attendance at the public school while the child is enrolled in the public school.” ORS 339.030(1)(a) provides, “In the following cases, children may not be required to attend public full-time schools:(a) Children being taught in a private or parochial school in the courses of study usually taught in grades 1 through 12 in the public schools and in attendance for a period equivalent to that required of children attending public schools in the 1994-1995 school year.” Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 14 May 2016 (Third Edition) Oregon’s Marijuana Laws Receipt of the request if the land use is allowable as an outright permitted use; or Final local permit approval, if the land use is allowable as a conditional use. Certain small-scale medical marijuana growers outside of city limits do not have to request a LUCS when applying for a recreational marijuana license. (SB 1598, § 2). A local government that has a ballot measure proposing to ban marijuana activities does not have to act on the LUCS while the ballot measure is pending. Local Government Means of Regulation In recent years, the Legislature has enacted several pieces of legislation that have encroached, but not entirely preempted, a city’s home rule authority to regulate marijuana. What follows is a discussion of those various encroachments and the options that remain available for cities that may wish to regulate or prohibit marijuana activities. Tax The OMMA was silent on local authority to tax, meaning that local governments retained their home rule authority to tax medical marijuana. Measure 91, on the other hand, attempted to preempt local government authority to tax recreational marijuana, though there were significant questions regarding the effect and scope of that purported preemption. In ORS 475B.345, adopted in 2015, the Legislature vested authority to “impose a tax or fee on the production, processing or sale of marijuana items” solely in the Legislative Assembly, except as provided by law. The Legislature also provided that a city may not “adopt or enact ordinances imposing a tax or fee on the production, processing or sale of marijuana items,” except as provided by law. The Legislature went on to provide that cities may adopt an ordinance, which must be referred to the voters, imposing a tax or fee of up to 3 percent on the sale of marijuana items by a retail licensee. The ordinance must be referred to the voters in a statewide general election, meaning an election in November of an even-numbered year. However, if a city has adopted an ordinance prohibiting the establishment of any recreational marijuana licensees or any medical marijuana registrants in the city, the city may not imposea local tax under that provision. In addition, in 2016, the Legislature adopted an additional restriction on local governments by providing that a local tax may not be imposed on a medical marijuana patient or caregiver. (SB 1511, § 18). ORS 475B.345 preempts local governments from imposing a tax on the production, processing or sale of recreational marijuana, except as provided by state law. State law provides that a city may impose up to a 3 percent tax on the sale of marijuana by an OLCC-licensed retailer, but an ordinance adopting such a tax must be referred to the voters at a statewide general election. In 2016, the Legislature attempted to expand the state preemption by providing that a local tax may not be imposed on a medical marijuana patient or caregiver. (SB 1511, § 18). Cities that do impose a local tax may look to the state for help in administering that tax. Recognizing that cities, particularly smaller cities, may not have the resources to administer and Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 15 May 2016 (Third Edition) Oregon’s Marijuana Laws enforce a local marijuana tax, the 2016 Legislature clarified that local governments may contract with the Oregon Department of Revenue (DOR) to collect, enforce, administer, and distribute locally-imposed marijuana taxes. (HB 4014, § 32). The League is working to develop a sample contract that cities interested in contracting with DOR can use as a starting point in discussions with the agency. For those cities that enacted taxes on medical or recreational marijuana prior to the Legislature’s adoption of ORS 475B.345, the status of those taxes remains an open question. Arguably, cities that had “adopt\[ed\] or enact\[ed\]” taxes prior to the effective date of ORS 475B.345 are grandfathered in under the law. However, the issue is not free from doubt, and cities that decide to collect on pre-ORS 475B.345 taxes should be prepared to defend their ability to do so against legal challenge. Consequently, cities that plan to continue to collect taxes imposed prior to the passage of ORS 475B.345 should work closely with their city attorney to discuss the implications and risks of that approach. Ban on Early Sales On October 1, 2015, medical marijuana dispensaries began selling limited quantities of recreational marijuana. Cities may adopt an ordinance prohibiting those early sales without referring the ordinance to voters and likely without tax implications. Although a city adopting an ordinance “prohibiting the establishment” of certain marijuana activities is not eligible to receive state marijuana tax revenues, an ordinance prohibiting early sales would merely limit the activities at an existing medical marijuana dispensary. As a result, cities would likely remain eligible to receive state tax revenues. However, cities likely cannot impose a local tax on early sales. Under ORS 475B.345, cities may not adopt or enact ordinances imposing a tax or fee on the production, processing or sale of marijuana items, except as provided in that legislation. ORS 475B.345 further stipulates that cities may refer an ordinance to voters imposing a tax of up to 3 percent on sales by a person that holds a retail license issued by the OLCC. Because early sales of recreational marijuana will be made by medical marijuana dispensaries, and not by a retail licensee, a city likely is preempted from imposing a tax on early sales of recreational marijuana. However, cities interested in imposing a local tax on early sales should consult their city attorney. Ban on State-Registered and Licensed Activities Under ORS 475B.800, cities may prohibit within the city the operation of recreational marijuana producers, processors, wholesalers and retailers, as well as medical marijuana processors and medical marijuana dispensaries. The lawis silent on whether a city can ban medicalmarijuana growers, marijuana laboratories, and marijuana researchers from operating in the city. However, ORS 475B.800 does not indicate that the bill’s process for banning marijuana activities is the exclusive means to do so. Cities considering banning medical marijuana grow sites, marijuana laboratories, or marijuana researchers should consult their city attorney about whether they can do so under either home rule, federal preemption or both legal theories. Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 16 May 2016 (Third Edition) Oregon’s Marijuana Laws Before December 24, 2015, cities located in counties that voted against Measure 91 by 55 percent or more (Baker, Crook, Gilliam, Grant, Harney, Jefferson, Klamath, Lake, Malheur, Morrow, Sherman, Umatilla, Union, Wallowa and Wheeler Counties) had the opportunity to enact a ban through council adoption of an ordinance prohibiting any of the six activities listed above. For cities that did not take that approach within the required timeline, and for cities not located in those counties, the city council may adopt an ordinance banning any of the six activities listed above, but that ordinance must be referred to the voters at a statewide general election, meaning an election in November of an even-numbered year. Medical marijuana dispensaries and medical marijuana processors that have registered with the state by the time their city adopts a prohibition ordinance are not subject to the ban if they have successfully completed a city or county land use application process. Under either procedure, as soon as the city council adopts the ordinance, it must submit it to the OHA for medical bans and the OLCC for recreational bans, and those agencies will stop registering and licensing the banned facilities. In other words, for cities using the referral process, the council’s adoption of an ordinance acts as a moratorium on new facilities until the election occurs. For cities using the referral process, it is also important to note that once the elections official files the referral with the county election office, the ballot measure is certified to the ballot.At that point, the restrictions on public employees engaging in political activity will apply. Consequently, cities should consult the secretary of state and their city attorney to ensure that public employees are complying with state elections law in their communications about the pending measure. If voters reject a ballot measure proposing to ban marijuana activities, the OHA and the OLCC will not begin registering and licensing marijuana facilities until the first business day of the January following the statewide general election. (HB 4014, § 31). That system will allow cities that want to regulate marijuana businesses time to adopt time, place, and manner ordinances after the ban is rejected and before new registrations or licenses are issued by the state. In determining whether to prohibit any of the marijuana activities registered or licensed by the state, cities may want to consider the tax implications. Cities that enact a prohibition on any marijuana activity likely will not be eligible to receive state marijuana tax revenues or impose a local tax, even if the city bans only certain activities and allows others. If a city that has imposed a ban decides to lift that ban, the governing body may repeal the ordinance, and must give notice of the change to the appropriate regulatory agency (either OHA or OLCC). (HB 4014, § 30). Itis also important to note that in 2016 the Legislature preempted cities from imposing restrictions on certain aspects of the personal possession of recreational and medical marijuana. (HB 4014 § 33). As a result, cities interested in enacting a banon any aspect of personal use and growing of marijuana should consult with their city attorney to discuss the scope of the preemption, and whether the city can regulate or ban under either home rule, federal preemption or both legal theories. Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 17 May 2016 (Third Edition) Oregon’s Marijuana Laws Business License Ordinance Although ORS 475B.800 provides an avenue for cities to ban certain marijuana activities, nothing in the statutemakes that the exclusive means for prohibiting marijuana activities. As a result, some cities may not need to go through the procedures outlined in ORS 475B.800 to ban marijuana activities because they may already have laws in place that create an effective ban. However, cities relying on other avenues to ban should be prepared to defend their authority to do so. A number of cities have imposed a ban through a local business license ordinance that provides that it is unlawful for any person to operate a business within the city without a business license, and further provides that the city will not issue a business license to any person operating a business that violates local, state or federal law. Indeed, cities that have a business license ordinance in place should review their existing codes to determine if such wording already exists. Additionally, whether adopting a new business license program or amending an existing one to provide that the city will not issue a business license to any person operating a business that violates local, state or federal law, a city should work with its legal counsel to ensure that its business license ordinance includes an enforcement mechanism to address a situation in which a person is operating a business without a business license. In addition, cities that decide to enforce a business license ordinance instead of adopting a ban under ORS 475B.800 should consult their city attorney regarding City of Cave Junction v. State of Oregon (Josephine County Circuit Court Case #14CV0588; Court of Appeals Case #A158118) and Providing All Patients Access v. City of Cave Junction (Josephine County Circuit Court Case #14CV1246, Court of Appeals Case #A160044). At issue in those cases is whether the city of Cave Junction may enforce its business license ordinance, which prohibits issuance of a business license to a business operating in violation of local, state or federal law, to effectively prohibit medical marijuana dispensaries from operating. Two trial courts in Oregon have upheld the city’s business license ordinance against challenges that it has been preempted by the OMMA (prior to its amendment by HB 3400). Both of those cases currently are on appeal before the Oregon Court of Appeals. Development Code Cities that desire to impose a prohibition on marijuana operations could also include in their development codes a provision stating that the city will not issue a development permit to any person operating a business that violates local, state or federal law. If not already defined, or if defined narrowly, the city will want to amend its code to provide that a development permit includes any permit needed to develop, improve or occupy land including, but not limited to, public works permits, building permits or occupancy permits. Land Use Code As noted previously, state law places restrictions on where certain marijuana activities can locate, including prohibiting certain processors, dispensaries and retail establishments from Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 18 May 2016 (Third Edition) Oregon’s Marijuana Laws locating in residential zones. In addition to those state requirements, cities can impose their own more stringent land use requirements and restrictions. Moreover, cities that desire to prohibit marijuana facilities altogether might also do so through amendments to their land use codes. Before considering this option, cities should work with their legal counsel to first determine if the wording of their zoning codes already prohibits marijuana operations, and if not, to identify the appropriate land use procedures and the amount of time it would take to comply with them. If the wording in a city’s zoning codes does not prohibit marijuana operations, the city has different options. One option is to add wording such as “an allowed use is one that does not violate local, state or federal law” to the city’s zoning code. Cities that adopt a prohibition that references federal law would then rely on existing mechanisms in their ordinances for addressing 9 zoning violations. It is important to note that under ORS 475B.063 (as amended in HB 4014, section 11), a land use compatibility statement is required as part of the OLCC’s licensing process. In particular, before issuing a producer, processor, wholesaler or retailer license, an applicantmust request a statement from the city that the requested license is for a location where the proposed use of the land is a permitted or conditional use. If the proposed use is prohibited in the zone, the OLCC may not issue a license. A city has 21 days to act on the OLCC’s request, but when that 21 days begins varies. If the land use is allowed as an outright permitted use, the city has 21 days from receipt of the request; if the land use is a conditional use, the city has 21 days from the final local permit approval. The city’s response to the OLCC is not a land use decision, and the city need not act on a LUCS request while a measure proposing to ban marijuana facilities is pending. Time, Place and Manner Regulations ORS 475B.340 (recreational) and ORS 475B.500 (medical) provide that local governments may impose reasonable regulations on the time, place and manner of operation of marijuana facilities. The League believes that, under the home rule provisions of the Oregon Constitution, local governments do not need legislative authorization to impose time, place and manner restrictions, and that the Legislature’s decision to expressly confirm local authority to impose certain restrictions does not foreclose cities from imposing other restrictions not described in state law. ORS 475B.340 and ORS 475B.500 provide that cities may regulate marijuana facilities by imposing reasonable restrictions on: 9 Under existing law, the League believes it is clear that a city may enforce civil regulations of general applicability (such as zoning codes, business licenses and the like) through the imposition of civil penalties. Although a city likely cannot directly recriminalize conduct allowed under state criminal law, it is a different legal question whether a city may impose criminal penalties for violating a requirement of general applicability when the conduct at issue is otherwise immune from prosecution under state law (i.e. whether a city may impose criminal penalties for operation of a medical marijuana dispensary in violation of a city’s land use code). Cf. State v. Babson, 355 Or 383, 326 P3d 559 (2014) (explaining that generally applicable, facially neutral law, such as a rule prohibiting use of public property during certain hours, may be valid even if it burdens expressive conduct otherwise protected under Article I, section 8, of the Oregon Constitution). Consequently, a city should work closely with its city attorney before imposing criminal penalties against a person operating a medical marijuana facility in violation of a local civil code, such as a zoning, business license or development code. Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 19 May 2016 (Third Edition) Oregon’s Marijuana Laws The hours of operation of recreational marijuana producers, processors, wholesalers, and retailers and medical marijuana grow sites, processing sites and dispensaries; The location of recreational marijuana producers, processors, wholesalers and retailers, as well as medical marijuana grow sites, processing sites and dispensaries, except that a city may not impose more than a 1,000-foot buffer between recreational marijuana retailers; The manner of operation of recreational marijuana producers, processors, wholesalers and retailers; production and processing by marijuana researchers; and medical marijuana grow sites, processing sites and dispensaries; and The public’s access to the premises of recreational marijuana producers, processors, wholesalers and retailers, as well as medical marijuana grow sites, processing sites and dispensaries. What regulations a city ultimately adopts will depend on community wants and needs, as well as on future changes to the law and to the rules adopted by the OHA and the OLCC. As a result, although cities may want to begin considering the types of regulations that they want to impose, cities should be aware that local needs may change with experience and as new laws and administrative rules go into effect. Local Government Regulation of Marijuana in Oregon League of Oregon Cities | 20 May 2016 (Third Edition) ATTACHMENTB Frequently Asked Questions About Local Regulation of Marijuana May 24, 2016 What’s New? Oregon’s medical and recreational marijuana laws are now codified in ORS chapter 475B. Provisions relating to recreational marijuana are found in ORS 475B.005 to 475B.399. Medical marijuana isaddressed in ORS 475B.400 to to 475B. 525. Testing of cannabis and cannabis products are covered in ORS 47B.550 to ORS 475B.590. Packaging, labeling and dosage of cannabis and cannabis products are covered in ORS 475B.600 to 475B.655. Taxation of cannabis and cannabis productsis addressed in ORS 475B.700 to 475B.760. Provisions relating to the authorit of cities and counties to prohibit the establishmet of cannabis-related businesses are found in ORS 475B.800. During the 2016 legislative session, the following amendments were made: HB 4014 (2016) Allows but does not mandate the ability for cities and counties to enter into IGA’s with Oregon Department of Revenue to collect local marijuana sales taxes (3percent) Clarifies that a land use compatibility statement (LUCS) request is not a land use decision and therefore not subject to review by the Oregon Land Use Board of Appeals Eliminates two-year residency requirement Reduces the cost ofa medical marijuana card for veterans Directs OLLC to adopt rules allowing medical marijuana grow sites, processing sites and dispensaries to convert from OHA to OLLC licenses Allows tax deduction for production, processing or sale of marijuana items which would have otherwise been available under section 280E of Internal Revenue Code Creates a process by which city or county can repeal a previously adopted ban on one or more types of marijuana business (the “opt-in” ordinance) SB 1598 (2016) Allows existing medical marijuana growers operating outside of cities to sell into the recreational market without completing a LUCS/ LUCS still required within city limits Treats medical marijuana grown on agricultural lands as a farm crop but allows city or county to impose reasonable regulations on marijuana production other unlike other agricultural crops Frequently Asked Questions About Local Regulation of Marijuana 1 May 24, 2016 SB 1511 (2016) Expands access to allow OLCC licensed producers, processors and retailers to participate in both recreational and medical marijuana markets Allrecreational marijuana will be subject to the “seed-to-sale” tracking requirement Expanded early start: adult-use customers able to purchase single serving low-dose marijuana products that have passed appropriate purity and potency tests from the OHA until December 31, 2016 Delay in effective date of plant limits: A medical grower in the process of applying to become an OLCC licensee (and who has filed the paperwork) is granted a stay on the reduction in plant limits through December 31, 2016 OHA is directed to consider higher allowable dosages for medical patients with serious medical conditions HB 4094 (2016) Exempts financial services from certain Oregon criminal laws for providing financing or financial services to marijuana businesses Below are answers to some of the most commonly asked questions aboutOregon’s marijuana laws and theirimpacts on local governments. HOME RULE AND FEDERAL LAW I’ve heard that cities did not need this legislation to regulate marijuana because Oregon is a home rule state. What is home rule? Home rule is the power of a local government to set up its own system of governance and gives that local government the authority to adopt ordinances without having to obtain permission from the state. City governments in Oregon derive home rule authority through the voters’ adoption of a home rule charter as provided for in the Oregon Constitution. All 242 cities in Oregon have adopted a home rule charter. A charter operates like a state constitution in that it vests all government power in the governing body of a municipality, except as expressly stated in that charter or preempted by state or federal law. So how does home rule relate to a city’s authority to regulate marijuana? Home rule authority allows local governments to enact ordinances regulating marijuana unless preempted by state law. The state Legislature can limit local government authority if it passes legislation that clearly and unambiguously preempts that authority. Because the Legislature recently passed four bills relating to marijuana, it is important to understand how state and local authority interact because that relationship will impact what cities can and cannot do when it comes to regulating marijuana. Specifically, unless clearly preempted, cities can impose regulations in addition to those authorized under ORS chapter 475B under their home rule authority. Frequently Asked Questions About Local Regulation of Marijuana 2 May 24, 2016 Isn’t marijuana illegal under federal law? If so, how can Oregon legalize it? Marijuana is classified under the federal Controlled Substances Act as a Schedule I drug, which means it is unlawful under federal law to grow, distribute, possess or use marijuana for any purpose. Individuals who engage in such conduct could be subject to federal prosecution. Thus far, courts have upheld a state’s authority to decriminalize marijuana for state law purposes. Oregon did so for medical marijuana in 1998 and for recreational marijuana in 2014. What that means is someone who grows, distributes, possesses or uses marijuana within the limits of those state acts is immune from state prosecution, but might still be subject to federal prosecution if federal authorities desired to do so. The U.S. Drug Enforcement Agency has indicated that it may consider reclassifying marijuana in the future. To date, this has not occurred nor is there any indication that any reconsideration by the DEA would result in a reclassification. Can we as a city council use our home rule authority and vote to re-criminalize marijuana within our city? No. A city’s home rule authority is subject to the criminal laws of the state of Oregon. As noted above, the OMMA and Measure 91 provide immunity from criminal prosecution for individuals who are acting within the parameters of those laws. Consequently, a council cannot remove the immunity provided by state law. The immunity provided by state law does not extend to all crimes committed while engaging in marijuana-related activities. For example, the immunity provided by state law does not apply to the crime of driving under the influence. Likewise a city should be able to impose criminal penalties against a person engaging in a marijuana-related activity that violates another law, such as a business license ordinance, zoning or anti-smoking regulations. However, before doing so, a city should work with its city attorney to confirm that the state law immunities do not apply. BANS Can my city ban the growing, processing, and sale or transfer of marijuana? ORS 475B.800 provides a process, explained below, for cities to ban six of the seven types of marijuana activities registered or licensed by the state. Specifically, the six types of marijuana activities that cities can ban under ORS 475B.800 are: Medical marijuana processors (preparingedibles, skin and hair products, concentrates and extracts); Medical marijuana dispensaries; Recreational marijuana producers (growers); Recreational marijuana processors (preparing edibles, skin and hair products, concentrates and extracts); Recreationalmarijuana wholesalers; and Recreational marijuana retailers. The seventh marijuana activity registered by the state is the growing of medical marijuana. The bills the Legislature enacted in 2015 are silent on whether a city can ban medical marijuana growers from operating. (State law does expressly place limits on the number of plants and the Frequently Asked Questions About Local Regulation of Marijuana 3 May 24, 2016 amount of marijuana that can be located at any particular grow site.) As noted below, the statutes do not indicate that the process in ORS 475B.800 for banning marijuana activities is the exclusive means to do so. Cities considering banning medical marijuana grow sites should talk to their city attorney about whether they can do so under either home rule, federal preemption, or both legal theories. What process does the city need to go through under ORS 475B.800 to impose a ban on the growing, processing, or sale or transfer of marijuana? Before December 24, 2015, cities located in counties that voted against Measure 91 by 55 percent or more (Baker, Crook, Gilliam, Grant, Harney, Jefferson, Klamath, Lake, Malheur, Morrow, Sherman, Umatilla, Union, Wallowa and Wheeler Counties)were permitted toenact a ban through council adoption of an ordinance prohibiting any of the six activities listed above. After that time, and for cities not located in those counties, the city council may adopt an ordinance banning any of the six activities listed above, but that ordinance must be referred to the voters at a statewide general election, meaning an election in November of an even- numbered year.The general election date for 2016 is November 8. As soon as the council adopts the ordinance, it must submit it to the Oregon Health Authority (OHA) for medical bans and the Oregon Liquor Control Commission (OLCC) for recreational bans, and those agencies will stop registering and licensing the banned facilities. In other words, for cities using the referral process, the council’s adoption of an ordinance acts as a moratorium on new facilities until the election occurs. Can my city ban the personal use and growing of marijuana? ORS chapter 475B does not provide an avenue for cities to ban the personal use and growing of marijuana. As a result, cities interested in enacting such a ban should consult with the city attorney to discuss whether the city can do so under either home rule, federal preemption, or both legal theories. If the city adopts a ban under ORS 475B.800, are existing marijuana activities grandfathered (allowed to remain open)? The answer depends upon the type of activity. Medical marijuana dispensaries and medical marijuana processors that have registered with the state by the time theircity adopts a prohibition ordinance are not subject to the ban if they have successfully completed a city or county land use application process. However, ORS 475B.800 does not provide similar protection to any of the other marijuana activities that a city can ban under that legislation. Consequently, recreational marijuana growers, processors, wholesalers and retailers are subject to a ban under ORS 475B.800, even if those businesses are already operatingat the time the ban was enacted. Although some businesses may argue that they have a due process right to continue operating, the status of marijuana as an illegal drug under federal law makes it unlikely that a court would recognize a due process right for a marijuana business owner. However, cities will want to work closely with their city attorney on enforcement of a ban against existing businesses. If my city adopts a ban under ORS 475B.800, will it still get a share of state marijuana tax revenues? Frequently Asked Questions About Local Regulation of Marijuana 4 May 24, 2016 No. A city that adopts an ordinance prohibiting the establishment of medical or recreational marijuanabusinesses is not eligible to receive a distribution of state marijuana tax revenues. If the voters in my city vote to reject the ban, when will the Oregon Liquor Control Commission or Oregon Health Authority begin registering or licensingmarijuana businesses? Section 31 of HB 4014 (2016) provides that licensing or registration on the first business day of the January immediately following the date of the statewide general election.This date was chosen to provide an opportunity for cities and counties to adopt localtime, place or manner restrictions, business license ordinances and forms and to take other action required to address issues and concerns relating to the addition of marijuana businesses in the city. Cities dealing with this situation will want to visit with their city attorney to discuss action steps and to further determine if there are home rule or business license possibilities to prohibit some or all marijuana business activities. My city requires businesses to obtain a license to operate, and city ordinance provides that the city will not issue a business license if a business operates in violation of local, state or federal law, creating an effective ban on marijuana businesses. Can we continue to enforce that ordinance instead of adopting a ban using the procedure described in ORS 475B.800? Yes. The League has taken the position that cities may still adopt and enforce their business license ordinances. However, a city should be prepared to defend its authority to do so. 1 ORS chapter 475B does not contain a broad express preemption on local government authority. Nothing in ORS 475B makes the ban procedures in the law the exclusive means for prohibiting marijuana businesses. Consequently, the League has taken the position that ORS 475B does not prevent a city from banning marijuana activities through other means, such as adopting or enforcing a business license ordinance that prohibits issuance of a business license to a business operating in violationof local, state or federal law. However, cities that decide to enforce a business license ordinance instead of adopting a ban under ORS 475B.800 should consult their city attorney about the case of City of Cave Junction v. State of Oregon, Josephine County Circuit Court Case #14CV0588, which is currently on appeal before the Oregon Court of Appeals. At issue in that case is whether the city of Cave Junction may enforce its business license ordinance, which prohibits issuance of a business license to a business operating in violation of local, state or federal law. If my city adopts a ban under ORS 475B.800 and the ban is approved by the voters at a statewide general election, will it be possible to repeal the ban at a later time? Yes, ORS 475B.800 provides the mechanism by which a city that has effectively banned marijuana businesses may repeal that prohibition. The process by which a city or county may opt in to allow marijuana businesses is quite similar to the process required (and described above) by which a city opted out of allowing marijuana businesses. 1 Section 57 of HB 3400 does provide that Measure 91 supersedes any “inconsistent” local enactments. Although some people have suggested that Section 57 is a broad preemption of local authority, the League disagrees. The liquor control act contains similar wording and the Oregon appellate courts have not interpreted that section to be a broad preemption. For more information and analysis of the inconsistency provision in Measure 91, as amended by ORS 475B, see the memorandum on the League’s A-Z Marijuana Resources webpage entitled, “Measure 91 and Local Control.” Frequently Asked Questions About Local Regulation of Marijuana 5 May 24, 2016 The city council must adopt an ordinance repealing its earlier ordinance which prohibited one or more of the six activities listed above, and that ordinance of repeal must be referred to the voters at a statewide general election, meaning an election in November of an even-numbered year. The general election date for 2016 is November 8. The next available election date to opt in will be November 6, 2018. As soon as the council adopts the ordinance, it must submit it to the Oregon Health Authority (OHA) for medical marijuana activities and the Oregon Liquor Control Commission (OLCC) for recreational marijuana activities. Those agencies will beginregistering and licensing on the first business day of the January immediately following the date of the statewide general election. This date was chosen to provide an opportunity for cities and counties to adopt local time, place or manner restrictions, business license ordinances and forms and to take other action required to address issues and concerns relating to the addition of marijuana businesses in the city. LOCAL TAX Can my city tax recreational marijuana? Yes, as long as the city has not adopted an ordinance under ORS 475B.800 prohibiting marijuana activities in the city. Under ORS 475B.345, cities may imposeup to a 3 percent tax on sales of marijuana items made by those with recreational retail licenses by referring an ordinance to the voters at a statewide general election, meaning an election in November of an even-numbered year. Can my city tax medical marijuana? It is unclear whether a city can tax medical marijuana. ORS 475B.345 provides that authority to “impose a tax or fee on the production, processing or sale of marijuana itemsin this state is vested solely in the Legislative Assembly,” and a city may not adopt or enact ordinances imposing a tax or fee on those activities except for the 3 percent tax on recreational activities discussed above. The legal question is whether that section applies to medical marijuana. Cities interested in taxing medical marijuana should work closely with their city attorney. My city enacted a tax on medical and recreational marijuana before ORS 475B was enacted. Can we continue to impose that tax now? The status of taxes enacted prior to ORS 475B is an open question. ORS 475B.345 provides that, except as provided by law, the authority to “impose” a tax or fee on the production, processing or sale of marijuana items is vested solely in the Legislative Assembly, and a city may not “adopt or enact” ordinances imposing a tax or a fee on those activities. Arguably, cities that have already adopted or enacted a tax prior to the effective date of ORS 475B.345 are grandfathered in. However, the issue is not free from doubt, and cities that decide to collect on pre-ORS475B345 taxes should be prepared to defend their ability to do so against legal challenge. Consequently, cities that plan to continue to collect taxes imposed prior to the passage of ORS475B.345 should work closely with their city attorney to discuss the implications and risks of that approach. My city requires all businesses to obtain a license and pay a fee. Does that fee count as part of the 3 percent tax or fee that the city can impose under HB 3400? Frequently Asked Questions About Local Regulation of Marijuana 6 May 24, 2016 HB 3400 limits a local tax on “the sale of marijuana items” to 3 percent and provides that a city may not otherwise adopt or enact an ordinance imposing a tax or fee on “the production, processing or sale of marijuana items.” Although ORS 475B.345 preempts certain local taxes and fees, a city may be able to continue to impose taxes and fees of general applicability, which are not specific and limited to marijuana businesses, without being subject to the 3 percent limit. Cities considering imposing such a tax or fee should obtain their city attorney’s advice before doing so. If my city adopts a ban for some—but not all—marijuana activities, can it still impose a local taxon those activities not banned? Probably not. ORS 475B.800(5) broadly provides that a city that adopts a ban under ORS 475B.800 prohibiting one or more marijuana activities within its jurisdiction “may not impose a local tax or fee on the production, processing or sale of marijuana or any product into which marijuana has been incorporated.” STATE TAX What is the state going to tax and in what amount? Under ORS 475B.700, the state will impose a 17 percent tax on the retail sale of marijuana items, including marijuana leaves and flowers; immature marijuana plants; marijuana concentrates and extracts; marijuana skin and hair products; and other marijuana products. Early sales of recreational marijuana from medical marijuana dispensaries, however, will be taxed at a higher rate. Starting January 4, 2016, early sales of recreational marijuana from a medical marijuana dispensary will be taxed at a rate of 25 percent. How much of the state tax revenues will go to cities? Ten percent of the state marijuana tax revenues will be distributed to cities that do not adopt ordinances prohibiting the establishment of marijuana facilities registered and licensed by the 2 state.The revenue will be distributed to cities “\[t\]o assist local law enforcement in performing its duties” under Measure 91. Early figures indicate that retail sales of marijuana have exceeded expectations, but insufficient information is available upon which one can draw any reasonable conclusions as to what actual dollar amounts might be available for distributionto cities. While preliminary revenue numbers have been described in popular media, very little information has been made available relating to the costs incurred by the State of Oregon in the administration and enforcement of ORS 475B. How will the state tax revenues be distributed to cities? Until July 1, 2017, the state tax revenue dedicated to cities will be distributed proportionately based on population to those cities that do not adopt prohibiting ordinances. After July 1, 2017, those revenues will be distributed proportionately based on the number of recreational licenses issued for premises located in each city. Fifty percent of the revenue for cities will be distributed based on the number of recreational grower, processor and wholesale licenses issued for a 2 The remaining revenues will be distributed as follows: 40 percent to the Common School Fund; 20 percent to the Mental Health Alcoholism and Drug Services Account; 15 percent to the State Police Account; 10 percent to counties; and 5 percent to the Oregon Health Authority. Frequently Asked Questions About Local Regulation of Marijuana 7 May 24, 2016 premises in the city. The other 50 percent will be distributed based on the number of recreational retail licenses issued for premises in the city. Will the Oregon Department of Revenue be available to help collect local marijuana sales taxes on behalf of cities and counties? Yes.Section 32 of HB 4014 amends ORS 305.620 to allow cities and counties to enter into intergovernmental agreements with the Oregon Department of Revenue (DOR)for the collection, enforcement, administration and distribution of local marijuana sales taxes. The League is working with the DOR to create an intergovernmental agreement template. TIME, PLACE AND MANNER RESTRICTIONS Does state law place any restrictions on where marijuana businesses can locate? Yes. Medical marijuana dispensaries, recreational marijuana retail stores, and medical and recreational marijuana processors that process marijuana extracts cannot locate in a residential zone. In addition, medical marijuana dispensaries and recreational marijuana retail stores are subject to the following restrictions: Neither can locate within 1,000 feet of certain public and private schools, unless the school is established after the marijuana facility. Medical marijuana dispensaries cannot locate within 1,000 feet of another dispensary. Medical marijuana dispensaries cannot locate at a grow site. Finally, before issuing anyrecreational marijuanalicense, the OLCC must request a statement from the city that the requested license is for a location where the proposed use of the land is a permitted or conditional use. If the proposed use is prohibited in the zone, the OLCC may not issue a license. A city has 21 days to act on the OLCC’s request, but when that 21 days starts to run varies: If the use is an outright permitted use, 21 days from receipt of the request; or If the use is a conditional use, 21 days from the final local permit approval. I have heard that the new legislation ends “card stacking” and puts limits on the amount of marijuana at a medical marijuana grow site. What are those limits? Generally, a medical marijuana grow site may have up to 12 mature plants if it is located in a residential zone, and up to 48 mature plants if it is located in any other zone. However, there are exceptions for certain existing grow sites. If all growers at a site had registered with the state by January 1, 2015, the grow site is limited to the number of plants that were at the grow site as of December 31, 2015, not to exceed 24 mature plants per grow site in a residential zone and 96 mature plants per grow site in all other zones. A grower loses the right to claim those exceptions, however, if the grower’s registration is suspended or revoked. In addition to possessing mature marijuana plants, a medical marijuana grower may possess the amount of usable marijuana that the person harvests from the mature plants, not to exceed 12 pounds of usable marijuana per mature plant for outdoor grow sites and 6 pounds of usable marijuana per mature plant for indoor grow sites. Frequently Asked Questions About Local Regulation of Marijuana 8 May 24, 2016 I have heard that cities can impose “reasonable restrictions” on medical and recreational marijuana businesses. What does that mean? Although the League takes the position that the Legislature has not foreclosed other regulatory options, ORS 475B.340, as amended by section 66 of HB 4014, expressly provides that cities may impose reasonable regulations on the following: The hours of operation of retail licensees and medical marijuana grow sites, processing sites and dispensaries; The location of all fourtypes of recreationallicensees, as well as medical marijuana grow sites, processing sites and dispensaries, except that a city may not impose more than a 1,000-foot buffer between retail licensees; The manner of operation of all four types of recreationallicensees, as well as medical marijuana processors and dispensaries; and The public’s access to the premises of all four types of recreationallicenses, as well as medical marijuana grow sites, processing sites and dispensaries. The lawalso provides that time, place and manner regulations imposed on recreationallicensees must be consistent with city and county comprehensive plans, zoning ordinances, and public health and safety laws, which would be true of any ordinance imposed by a city. EARLY SALES OF RECREATIONAL MARIJUANA What are “early sales” of recreational marijuana? As of July 1, 2015, people 21 years of age and older have been allowed to possess limited amounts of recreational marijuana under state law. TheOLCC anticipates the issuanceof licenses for the retail sale of recreational marijuana in 2016. To allow the OLCC time to implement its licensing system, while also providing an avenue for people to purchase recreational marijuana,the Legislature authorized medical marijuana dispensaries to sell limited quantities of recreational marijuana. In particular, medical marijuana dispensaries will be able to sell the following to a person who is 21 or older and presents proof of age: One quarter of one ounce of dried marijuana leaves and flowers per person per day; Four marijuana plants that are not flowering; and Marijuana seeds. When did early sales start? Medical marijuana dispensaries began selling limited quantities of recreational marijuana on October 1, 2015. Sales of recreational marijuana from medical dispensaries currently are set to end on December 31, 2016. At that time, recreational retail facilities likely will be operating and selling recreational marijuana. Can my city opt out of early sales? Frequently Asked Questions About Local Regulation of Marijuana 9 May 24, 2016 Yes. Under SB 460, a city may adopt an ordinance prohibiting the early sales described above. The city council may adopt the ordinance without referring it to the voters. If my city opts out of early sales, is the city still eligible to receive state marijuana tax revenues? Probably. HB 2041 provides that a city that adopts an ordinance “prohibiting the establishment” of marijuana businesses registered or licensed by the state is not eligible to receive state marijuana tax revenues. An ordinance prohibiting early sales under SB 460, however, would not prohibit the establishment of a state-registered or licensed facility. Rather, such an ordinance would merely limit the activities at an existing medical marijuana dispensary. As a result, a city prohibiting early sales should remain eligible to receive state marijuana tax revenues. Can my city impose a local tax on early sales? Probably not. Under ORS 475B, cities may not adopt or enact ordinances imposing a tax or fee on the production, processing or sale of marijuana items, except as provided in that legislation. ORS 475B.345 further stipulates that cities may refer an ordinance to the voters imposing a tax of up to 3 percent on sales by a person that holds a retail license issued by the OLCC. Because early sales of recreational marijuana will be made by medical marijuana dispensaries, and not by a retail licensee, a city likely is preempted from imposing a tax on early sales of recreational marijuana. However, cities interested in imposing a local tax on early sales should consult their city attorney. TIMELINE The following is a summary of key dates that local government officials need to be aware of regarding the effective date and implementation of Oregon’s new marijuana laws: January 1, 2016 – Most amendments to Measure 91 go into effect. In addition, after this date, medical marijuana growers became eligible to apply for an OLCC license to grow recreational marijuana at the same site. January 4, 2016 – The OLCC must approve or deny recreationallicense applications as soon as practicable after this date (HB 3400 § 171). In addition, medical marijuana dispensaries engaging in early sales of recreationalmarijuana must begin collecting a 25 percent state tax on those sales. March 1, 2016 – Most amendments to the OMMA go into effect. November 8, 2016 – Next statewide general election. Cities may refer measures on prohibition of marijuana activities and measures on local taxes at this election. December 31, 2016 – Early sales of recreationalmarijuana from medical marijuana dispensaries end. January 2, 2017 – OLLC and OHA begin processing applications of marijuana businesses in cities and counties where proposed bans were rejected by local voters. Frequently Asked Questions About Local Regulation of Marijuana 10 May 24, 2016 COUNCIL ORDINANCE NO. 20566 COUNCIL BILL 5156 AN ORDINANCE CONCERNING IMPOSITION OF A THREE PERCENT TAX ON THE RETAIL SALES OF RECREATIONAL MARIJUANA; ADDING PROVISIONS TO THE EUGENE CODE, 1971; PROVIDING FOR AN EFFECTIVE DATE; AND REFERRING THE CODE AMENDMENTS TO THE ELECTORS OF THE CITY AT THE NOVEMBER 8, 2016 ELECTION. ADOPTED:July 25, 2016 SIGNED:July 26, 2016 PASSED:7:1 REJECTED: OPPOSED: Brown ABSENT: EFFECTIVE: If Passed by Voters: January 1, 2017 ORDINANCE NO. 20566 AN ORDINANCE CONCERNING IMPOSITION OF A THREE PERCENT TAX ON THE RETAIL SALES OF RECREATIONAL MARIJUANA; ADDING PROVISIONS TO THE EUGENE CODE, 1971; PROVIDING FOR AN EFFECTIVE DATE; AND REFERRING THE CODE AMENDMENTS TO THE ELECTORS OF THE CITY AT THE NOVEMBER 8, 2016 ELECTION. THE CITY OF EUGENE DOES ORDAIN AS FOLLOWS: Section 1. Retail Tax on Marijuana Items 3.700 Retail Tax on Marijuana Items - Definitions. City Manager Tax Administrator Consumer Marijuana item Marijuana retailer Person Retail sale price 3.702 Retail Tax on Marijuana Items - Tax Imposed. 3.704 Retail Tax on Marijuana Items - Collection.